Friday, October 2, 2009

Citadel’s $1 billion High Frequency Trading (HFT) Heist

Move over Maria Bartiromo; make way for Ken Griffin the newest money honey in town. And all you quant people out there watch out, coz queen bee Ken Griffin has his stinger out. The WSJ is reporting that Citadel is suing former employees for allegedly stealing their lucrative high frequency trading formula. And how lucrative was this jackpot you might ask? does earning $1 billion churning garbage stocks in 2008 sound to you? Pretty good yeah…we thought so.
Oh and talk about growth in this business! As the WSJ reports:
Mr. Malyshev in testimony Thursday detailed the Citadel unit's growth in recent years. It posted returns of $892 million in 2007, up from $75 million in 2005 and about $3 million in 2004, according to Mr. Malyshev.
Yeah Ken Griffin is a true American Capitalist. He knows not to waste time 'investing capital', which would involve taking some risk while lending money out to seed businesses which can create jobs in this country. Nope that ain’t a worthy enough cause Sir. He would be Stupid to do that...that is what ordinary mom and pop investors are for: those who have been sold the "invest for the long term" bed-time story.
Our money honey is way smarter than that. You see he does not believe in taking any risk. Why do that when you can make free money front running mutual fund investors and churning garbage stocks like AIG and Citigroup? As Joe Saluzzi the High Frequency Trading whistleblower points out - the stock exchanges are only too happy to pay Citadel a fee for bringing much needed liquidity to garbage stocks. And once you have run them up far enough, all you need is for some gullible mom and pop investor to provide the ‘much needed liquidity’ so that Citadel can offload its crap.
As Louis Armstrong would remind us “And I think to myself…Oh What a Wonderful World”.

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